Sucke Defends SAG/NY Lease

By
Roger Armbrust
| Posted Sept. 6, 2001, midnight

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Screen Actors Guild/New York's executive director has written the guild's finance committee and national board of directors regarding issues raised concerning the local guild's multi-million-dollar lease for new offices located at 360 Madison Ave.

Calling his Aug. 30 letter "a summary of all the issues raised," John Sucke, SAG/NY's staff chief, listed and responded to six questions, including whether the location was chosen with "due diligence;" did SAG's board of directors consider buying a building rather than leasing; and would staying in SAG's present location at 1515 Broadway be less expensive.

Sucke traced the steps SAG's relocation committee took in hiring realtors to find a new location, the realtor's search, bargaining with landlords, and the SAG board's lease approval for 360 Madison. The lease was signed on Nov. 19, 1999. According to the SAG board Eastern section's minutes of Oct. 19, 1999, the guild's lease was for 20 years, totaling $46.45 million.

SAG leaders had little interest in purchasing a building, Sucke noted in his letter, citing a previous "unfortunate experience with buying property in Hollywood and few board members wanted to undertake such a risk in NY." He said SAG/NY did look at a possible condominium purchase, but dropped that idea.

It presently isn't clear if SAG/NY could even stay at 1515 Broadway, Sucke explained. Viacom is that location's chief tenant, and "Viacom has an agreement with the landlord to allow it a final opportunity to 'upset' any proposed lease for space in the building. Although Viacom has not agreed to take our space at 1515 Broadway, it still has the option to change its mind if a deal is about to be completed for the space.

"Our current space at 1515 Broadway is on the market now for a 15-year lease at $70 per square foot for the first five years," Sucke continued, "$75 psf for the next five and $80 psf for the final five. In addition, the landlord would probably offer four months free rent as well as $30 psf in construction cost reimbursement."

Sucke compared those figures to 360 Madison's lease, which would begin at $39 psf for the first two years and grow to $55 psf by the last two years.

He listed a comparison of total costs for a 15-year rent obligation as $38.25 million for 1515 Broadway and $33.75 million for 360 Madison.

Sucke's letter also notified SAG leaders that the guild's 10-day deadline for giving notice of breaking the 360 Madison lease was long past. The guild could have provided such notice within 10 days following the deadline of July 1 if the landlord had not completed the building's concrete superstructure. He said the landlord, Madison 45 Company, had notified SAG on July 11 that the superstructure had been "substantially completed" on June 1. But some SAG/NY board members had observed concrete delivery trucks continuing to "report to the building" after July 1, and even have videotaped work going on.

In a March 23 memo to SAG's national finance committee, Gerald Wilson, SAG's national finance director, called on the guild to get out of the lease if the landlord missed the July 1 superstructure deadline, and seek another location. Sucke responded with his own memo four days later. He said that Wilson's memo didn't mention that Midtown's rental market "has significantly tightened in the last year and, as a result, average rental rates have moved up by 15% to 30%," Sucke noted. He added that SAG's lease terms were "quite favorable" when signed and "are an extraordinary deal today."

The final question Sucke responded to in his Aug. 30 letter was "If the current NY staff occupies 35,000 sf, why does the 360 Madison lease cover 50,326 sf?

Sucke said the new lease includes nearly 4,000 sf to be occupied and paid for by the SAG-Producers Pension and Health Fund, and another 5,000 sf would be sublet by an outside tenant. "Since rental rates have increased substantially since we signed our lease, this sublease may actually produce income to help defray the overall rental cost. Space is also included for Conservatory Programs and for Book Pals. It is possible that these programs may also contribute to payment of the rent."

In his conclusion, Sucke called the 350 Madison property "the best choice by far and a phenomenal deal," adding that to be able to cancel the obligation and begin again would be "virtually impossible."